Peter Morici: Economy will drag on Trump’s re-election hopes |
Featured Commentary

Peter Morici: Economy will drag on Trump’s re-election hopes

President Donald Trump pauses while speaking during a meeting with Romanian President Klaus Iohannis in the Oval Office Aug. 20.

The U.S. economy is delivering bad news to the White House. Second-quarter growth was only 2.1% and is not likely to return to 3% on a sustained basis. Significant wage increases, booming corporate profits, and double-digit stock grains SPX, -1.22% are not likely in the months leading up to the presidential election.

Lackluster economies sunk the re-election hopes of Jimmy Carter and George H.W. Bush. Donald Trump’s failure to deliver meaningful health-care reform and the pain inflicted on Midwestern farmers by Chinese retaliation against his tariffs make matters worse.

Forces having nothing to do with who occupies the Oval Office negatively affect U.S. growth. His trade wars notwithstanding, China and Europe are stuck in the mud and saddled by political dysfunction.

Chinese President Xi Jinping’s strategy for dictatorial control penalizes private companies and entrepreneurs to boost its highly inefficient state-owned enterprises and squanders a lot of economic resources and credibility with foreign investors.

Germany’s trade surpluses require southern European Union states to endure endless growth sapping trade deficits, and German and Italian banks are in terrible shape.

The U.S. economy is creating lots of jobs but skills shortages abound because the nation’s higher education system spends too much and delivers too little. It graduates fewer than 60% of students admitted, many graduates lack critical thinking and problem-solving skills essential for professional work, and even more lack job-ready, specialized skills.

Trump’s top advisers — National Economic Council Director Larry Kudlow and Treasury Secretary Stephen Mnuchin — need some soul searching about tax cuts and resisting measures that could more quickly resolve trade issues with China.

On the demand side, growth must be driven by consumer spending, business investment and fixing the trade deficit — the latter sends too many dollars abroad that don’t come back to purchase U.S. goods.

Consumer spending has proven robust but is shifting from big-ticket autos to high-tech gadgets, Uber and other services. Notably a good deal of the job growth is in low skilled and highly skilled categories — middle-skilled occupations are hollowing out. Not surprising, many poorly trained college graduates end up at venues like Starbucks, and income inequality worsens.

Principal competitors — China, Japan and Germany — have growth policies premised on undervalued currencies that cheapen exports and protect domestic manufacturing — but Trump’s trade war is a bust. The trade deficit is up over $100 billion on his watch.

Negotiations with China are at a stalemate, because the president is reluctant to deliver a knockout punch.

For example, cutting a deal with ZTE and imposing only partial measures on Huawei, when absolute restrictions on their purchases of U.S. components and sanctions on foreign businesses and banks that enable their piracy would put ZTE out of business and seismically shake Huawei and Xi’s grasp on power.

Multinationals are diversifying supply chains from China. Despite the promises of Trump trade adviser Peter Navarro, factories have moved to other Asian locations, not America. Consequently, American businesses are investing their tax-cut money abroad and U.S. imports of manufactures are shifting their origins rather than creating new jobs here.

Meanwhile, Chinese retaliation has pushed down U.S. exports.

Not able to get China off the table, Trump can’t take on German and Japanese protectionism — once and for all.

Tweeting and telling voters what a great relationship he has with a dictator and human-rights abusers like Xi only works when you want to become president. More than bravado and halfway measures are needed to fix what’s broken with the American economy.

TribLIVE commenting policy

You are solely responsible for your comments and by using you agree to our Terms of Service.

We moderate comments. Our goal is to provide substantive commentary for a general readership. By screening submissions, we provide a space where readers can share intelligent and informed commentary that enhances the quality of our news and information.

While most comments will be posted if they are on-topic and not abusive, moderating decisions are subjective. We will make them as carefully and consistently as we can. Because of the volume of reader comments, we cannot review individual moderation decisions with readers.

We value thoughtful comments representing a range of views that make their point quickly and politely. We make an effort to protect discussions from repeated comments either by the same reader or different readers

We follow the same standards for taste as the daily newspaper. A few things we won't tolerate: personal attacks, obscenity, vulgarity, profanity (including expletives and letters followed by dashes), commercial promotion, impersonations, incoherence, proselytizing and SHOUTING. Don't include URLs to Web sites.

We do not edit comments. They are either approved or deleted. We reserve the right to edit a comment that is quoted or excerpted in an article. In this case, we may fix spelling and punctuation.

We welcome strong opinions and criticism of our work, but we don't want comments to become bogged down with discussions of our policies and we will moderate accordingly.

We appreciate it when readers and people quoted in articles or blog posts point out errors of fact or emphasis and will investigate all assertions. But these suggestions should be sent via e-mail. To avoid distracting other readers, we won't publish comments that suggest a correction. Instead, corrections will be made in a blog post or in an article.